Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, September 22, 1993 TAG: 9309220064
SECTION: BUSINESS PAGE: B8 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: LENGTH: Medium
Stuffed in the bills is a notice of a 2.8 percent rate increase the company implemented this month, subject to review by the State Corporation Commission.
The new rate would raise revenues $1.3 million annually, but the company said it doesn't expect all of it to be approved. John Williamson III, vice president of rates and finance, estimated the commission could deny about $500,000 of the request.
One thing working against the request is low interest rates. The SCC has been reacting to that by trimming its allowed rate of return to utilities about 1 percent, said Ken Schrad, commission spokesman.
Williamson said he expects the allowed rate of return to Roanoke Gas will be lowered from 11.75 percent to about 11.1 percent.
But Roanoke Gas hopes selling common stock to gas customers will raise up to $750,000 a year for its construction budget and reinforce customer good will.
Roanoke Gas on Monday filed an application for the stock plan with the State Corporation Commission and plans to file soon with the U.S. Securities and Exchange Commission. If it gets the regulatory approvals without undue delay, it could be ready to mail customers copies of its stock prospectus by Nov. 1, Williamson said.
Under the plan, customers initially would invest at least $100, buying about three shares at the current price of $32 per share. After the initial purchase, customers would be able to invest as little as $25 per month.
First Union Bank will be the stock sales agent and would set up purchases through an automatic check draft. Customers would be able to take delivery of their stock certificates or leave them with the bank for safekeeping.
Williamson said Roanoke Gas expects between 1.5 percent and 3.5 percent of its 53,000 customers - roughly 1,600 - to participate in the plan. If that projection, based on similar plans offered by other utilities around the country, proves true, it would nearly triple the company's stockholder base of 900 investors.
It's hard to tell how much money the stock plan will raise, Williamson said. If 1,600 customers each buy $25 worth a month, the company would raise $480,000 a year.
But the company is hoping to raise more than that.
Roanoke Gas expects to need money over the next several years to pay for construction of its plant and lines and for reconstruction, particularly in Roanoke where some of the 110-year-old company's lines are very old, Williamson said.
The company has an annual construction budget of $3.5 million, which requires $1.5 million in outside funds to finance. A stock offering bringing in $750,000 a year would meet its goal of paying for at least half its construction budget through stockholders' equity, with borrowing making up the rest.
Dominion Resources Inc., the Richmond parent of Virginia Power, has not needed a general stock offering in 10 years because it has raised enough money through a similar customer stock purchase plan, Williamson said.
Dominion Resources started its stock-purchase plan for customers during the 1970s, when the electric utility was under attack by former Democratic gubernatorial candidate Henry Howell.
Williamson said customer good will is one goal of the Roanoke Gas plan. The company couldn't think of a better way to foster good customer relations than making customers owners of the company, he said.
The stock will be offered to the company's Roanoke Gas, Bluefield Gas and Highland Propane customers, but not to the general public, Williamson said.
Stock purchasers will qualify for an 18-month-old company plan that allows stock dividends to be reinvested in additional stock.
Others who are interested in the stock may still buy it through a broker. The stock is thinly traded, but plans are in the works - though not yet approved by Roanoke Gas board of directors - to list the stock on the NASDAQ system for over-the-counter stocks. That move could come next year, along with a possible stock split.
The company would like to make it easier for those who buy its stock to trade it, Williamson said.
by CNB